Jonathan Liss

Northern Trust Bows Out of ETF Business, Raising Industrywide Concerns

Aalan,

I agree the big firms will be fine but I think this will prove to be a very tough environment for the little guys and even for larger firms that are relative newcomers to the industry. I think XShares is a good example of a smaller firm that hasn't been able to cut it in this environment, though some of their product choices certainly haven't helped. NETS is a good example of a larger product, with some serious muscle behind it (Northern Trust's money management arm has $75 billion under management) that just couldn't cut it - an unfortunate case of coming to the party at the wrong time.

Somewhere down the road, I think we will end up with many smaller 'niche' ETF issuers on the investing landscape, similar to what currently exists in the mutual fund industry. But that may have to wait until the current recession and crisis in investor confidence blows over.

Until investors return capital to the market in serious numbers, I don't see how a lot of these smaller players and especially funds with assets under $10-$20 million can stay open - the current environment is simply too unforgiving.